Independence Realty Trust (NYSE:IRT) executives told investors the company delivered “solid” 2025 results despite challenging apartment fundamentals and said they see a “meaningfully better” setup in 2026 as supply pressures recede across most of its markets.
2025 performance and operating initiatives
Chief Executive Officer Scott Schaeffer said 2025 same-store NOI growth exceeded the company’s initial guidance and highlighted several operational initiatives intended to support efficiencies and cost savings over time. Those initiatives included implementing an AI leasing agent, refining bad debt management, and reducing the average turn time on value-add renovations to 25 days. Schaeffer also said IRT successfully rolled out a Wi-Fi initiative and plans to expand it to 63 communities covering 19,000 units as part of its 2026 plan.
Quarterly and full-year financial results
President and Chief Financial Officer Jim Sebra said core FFO per share was $0.32 for the fourth quarter and $1.17 for full-year 2025, both in line with guidance. Same-store NOI grew 1.8% in the fourth quarter, driven by a 2% increase in same-store revenue and a 2.4% increase in operating expenses versus the prior year. For the full year, same-store NOI rose 2.4% based on 1.7% revenue growth and a 50-basis-point increase in operating expenses.
Sebra attributed fourth-quarter same-store revenue growth to a 124-basis-point improvement in bad debt compared with the fourth quarter of 2024, along with a 60-basis-point increase in average effective monthly rents, partially offset by a 10-basis-point decline in average occupancy. Higher fourth-quarter expenses were linked to repairs and maintenance from a greater volume of turns, project timing, and increased contract services tied primarily to ancillary services offered to residents, which were offset by other income. These increases were partially mitigated by lower real estate taxes and insurance costs.
For full-year 2025, Sebra said same-store revenue growth was led by an 80-basis-point increase in average effective monthly rents, a 30-basis-point increase in average occupancy, and a 70-basis-point improvement in bad debt. Expense growth for the year reflected higher advertising and contract service costs, largely offset by lower insurance and real estate taxes.
Leasing trends and early 2026 setup
Sequential point-to-point occupancy in the fourth quarter was stable at 95.6% for the same-store portfolio. New lease trade-outs in the fourth quarter were -3.7%, and renewals increased 30 basis points to 2.9%. Resident retention increased 100 basis points to 61.4%.
In early 2026, Sebra said asking rents in the same-store portfolio increased 73 basis points since December 31, while new lease trade-outs remained consistent with the fourth quarter. Renewal trade-outs in January were 20 basis points higher than the fourth quarter, and management said it expects approximately 3.5% renewal trade-outs for February and March.
Addressing questions on 2026 assumptions, Sebra said the company’s full-year new lease trade-out assumption of negative 75 basis points reflects a weak first half and stronger second half:
- First-half 2026 new lease growth is expected to be down about 2.25%.
- Second-half 2026 new lease growth is expected to be up roughly 75 basis points.
He added that asking rent growth in January was “a little bit faster pace” than what IRT would normally see in a seasonally slower period, but slower than January of last year. When asked about bad debt, Sebra said full-year 2025 ended at 110 basis points of revenue, while the fourth quarter alone was 72 basis points. For 2026 guidance, the company assumed 90 basis points of revenue, starting higher in the first quarter and stepping down to the 80-to-70 basis-point range by the fourth quarter.
Capital allocation, transactions, and balance sheet
During the quarter, IRT sold a 356-unit Louisville community held for sale for $50 million at an economic cap rate of 5.2%. The company also entered a new joint venture in Indianapolis to develop a 318-unit community slated for completion in the second half of 2027.
Subsequent to quarter end, IRT purchased a 140-unit community in Columbus for $30 million (economic cap rate of 5.6%) located two miles from existing IRT communities. The company also acquired its joint venture partner’s 10% interest in Tisdale at Lakeline Station in Austin, Texas, and began consolidating the $115 million asset on its balance sheet; management said the property is fully developed and in lease-up.
On the capital markets front, IRT repurchased 1.9 million shares for $30 million at an average price of $16 per share. Sebra said the company used capital from “non-EBITDA-generating sources,” including proceeds tied to joint venture activity and gains in forward contracts, to buy back stock amid what he described as a disconnect between implied and market cap rates.
IRT also entered into a new $350 million, four-year unsecured term loan, using proceeds to repay a $200 million term loan and mortgages maturing later in 2026. As of December 31, net debt to adjusted EBITDA was 5.7x, with management intending to improve the ratio to the mid- to low-5x range. Sebra said that, adjusting for the term loan activity, IRT has no debt maturities between now and 2028.
2026 guidance and market commentary
For 2026, IRT established EPS guidance of $0.21 to $0.28 per share and core FFO guidance of $1.12 to $1.16 per share. Sebra outlined a bridge from 2025 core FFO of $1.17 to the $1.14 midpoint of 2026 guidance, including 1 cent of improvement from same-store NOI growth and 1 cent from non-same-store NOI growth, offset by lower preferred income from joint ventures, higher interest expense, and higher corporate costs.
The company’s midpoint 2026 outlook assumes same-store NOI increases 80 basis points, driven by 1.7% same-store revenue growth and a 3.4% increase in total same-store operating expenses. The rental revenue assumptions include average occupancy of 95.5%, bad debt of 90 basis points of revenue, and a 5.4% increase in other income primarily from $5.5 million of incremental Wi-Fi revenue expected to commence in July 2026. IRT’s blended effective rent growth assumption of 1.7% includes new lease trade-outs of -75 basis points, renewal trade-outs of 3.25%, and a 60% resident retention rate. Management said it expects market rents to increase about 1.5% to 2%.
On expenses, controllable operating expenses are expected to rise 5.1%, including $1.9 million of Wi-Fi contract costs; excluding Wi-Fi, controllable expenses are expected to increase 3.5%. Non-controllable costs assume a 2.6% increase in real estate taxes and an 11.5% decrease in property insurance costs. In Q&A, management said payroll and utilities were key drivers behind controllable expense increases, with payroll reflecting inflationary increases, higher incentive compensation, and the absence of certain healthcare savings experienced in 2025.
IRT’s non-same-store portfolio entering 2026 consists of eight communities totaling 2,541 units, including two assets held for sale expected to be sold by mid-year. Sebra said two lease-up assets—IRT’s legacy development in Broomfield, Colorado (Flatirons) and the Austin joint venture—are leasing more slowly than anticipated and with larger concessions than previously modeled, with targeted NOI expected later than originally planned. Guidance assumes non-same-store NOI of $25 million to $26 million at the midpoint, and Sebra noted the company assumed conservatism in the pace of NOI build from those lease-ups. He also said IRT’s guidance assumes it owns the Austin asset for the full year, though management anticipates it “probably” may be sold later in 2026 to limit earnings drag.
Discussing markets, management said the Midwest (including Columbus, Indiana, and Kentucky) delivered consistent performance and is expected to continue doing so in 2026. The company cited improving fundamentals in several Sun Belt and growth markets, including Atlanta, Nashville, Dallas, and Raleigh, while noting weaker conditions in Memphis and elevated supply pressure in Denver. For Flatirons in Broomfield, Sebra said guidance assumes reaching about 90% occupancy in June, roughly a quarter behind prior expectations, with concessions and rent levels also contributing to earnings drag.
About Independence Realty Trust (NYSE:IRT)
Independence Realty Trust is a self-administered equity real estate investment trust that acquires, redevelops and manages multi-family communities. The company focuses on workforce housing, targeting Class A and B garden-style apartments in suburban and urban infill locations. Its core activities include sourcing value-add acquisitions, overseeing property renovations and delivering in-house property management services to optimize rental income and occupancy levels.
Headquartered in Wayne, Pennsylvania, Independence Realty Trust maintains a geographically diverse portfolio across several high-growth U.S.
